Upbeat earnings news from Hewlett-Packard and Salesforce.com and better-than-expected October PC sales in the U.S. could not boost confidence in the technology sector as IT investors continue to dump shares, bringing the Nasdaq composite index, weighted heavily with tech companies, to lows not seen since the depths of 2002 in the wake of the dot-com bust.

The Nasdaq closed on Thursday at 1341, a new low for the year and a level not seen since the third quarter of 2002. If the Nasdaq slips another 250 points it would be back at 1997 levels. So far, the Nasdaq has dropped 1348 points from a year ago, before the housing crisis brought down investment banks.

The financial crisis, sparked by falling housing prices and mortgage defaults, is at the heart of the crisis in technology just as it is for other sectors of the economy. With credit tight and consumers worried about their jobs, businesses and end-users are expected to spend less.

In one sign that money will be tight all around, bankers involved in technology mergers and acquisitions and initial public offerings are pessimistic about the next few quarters, according to the 451 Tech Banking Outlook Survey published this week.

"Late last year, normally bullish technology bankers started pulling in their horns. This time around, they've turned into outright bears," said analyst Brenon Daly in a note accompanying the report. "Slightly more than half of those surveyed say their pipeline, when measured in dollars, has shrunk since the same time last year, with only one-quarter saying business has picked up."

The amount of dollars spent on tech M&A so far this year is about one-third below 2007, according to the report. Last year, tech M&A amounted to US$480 billion, while so far this year it has added up to about $286 billion.

Investment analysts continue to cite weakening demand as they cut their targets for IT vendors. Thursday, Goldman Sachs cut its share price target for SAP, the biggest ERP (enterprise resource planning) vendor in the world, to $34 from $43, based on lower expectations. Merrill downgraded Dell to "neutral" from "buy" earlier in the week. Merrill also cut price targets on Adobe based on weak economic outlook, despite the company's rollout of new Web-oriented products and service at its Adobe Max developer conference in San Francisco this week.

Niche tech suppliers are also getting hit. Credit Suisse, for example, cut its share price target on electronic-measurement company Agilent Technologies to $23 from $37.

Meanwhile, the first drop in worldwide semiconductor chip sales in seven years is now being forecast by the Semiconductor Industry Association. Chip sales next year will decline by 5.6 percent to $246.7 billion, the group said Wednesday.

Reporting quarterly results Thursday, Dell said global IT demand will continue to be "challenging." Dell issued mixed results. Though profit was better than expected, revenue did not live up to expectations. Profit declined by 5 percent to $727 million, or $0.37 a share. Analysts polled by Thomson Reuters expected worse, however, forecasting profit of only $0.31 per share. Revenue fell 3 percent to $15.16 billion, while analysts expected $16.3 billion.

Online spending, which has been a bright spot, has also been tarnished lately. Though online ad revenue generated almost $5.9 billion in the third quarter, up 11 percent over the year-earlier period, that growth rate is less than half of what it was a year ago, according to a report released Thursday from the Interactive Advertising Bureau and PricewaterhouseCoopers.

There were some glimmers of light. HP Tuesday issued preliminary results for the fourth quarter, reporting that revenue was $33.6 billion, a 19 percent year-over-year increase. Taking away the effects of foreign exchange rates and excluding recently acquired services company EDS from the results, a comparison to last year would have HP sales increasing by only about 2 percent. Nevertheless, the rise is relatively good news and makes HP's buy of EDS seem far-sighted. HP ascribed the revenue rise to "global reach, diverse customer base, broad portfolio and numerous cost initiatives."

On its part, Salesforce.com Thursday beat analyst expectations, suggesting that the hosted software model may fare well in tough economic times. Salesforce reported profit, excluding one-time items, of $0.18 per share, compared to the consensus analyst estimate of $0.17. Net profit rose to $10.1 million from $6.5 million, while revenue jumped 43 percent to $276.5 million.

Citigroup Global Research saw hope in October retail PC sales in the U.S., which increased 10 percent from 2007, according to market research group NPD.

"The results are surprisingly solid," said Richard Gardner in a research note.

Still, the few bright spots could not help an overall down market. HP, which gained earlier in the week on its news, declined by $1.20 to close at $31.83 Thursday.

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